Electricity Heavyweights Tackle Locational Price Risk
October 1st, 2008
It’s one of those obscure aspects of the way the national grid works, but locational risk factor management is a contentious, long-running $100m a year cost to the electricity industry, so it matters submissions are now in on the EC’s proposals. The EC wants to abandon development of Financial Transmissions Rights in favour a Locational Regional Allocation approach for dealing with locational risk factors. FTRs are the norm in a number of like countries to NZ, whereas LRAs are more experimental, but are believed by the EC - and some of the big gen-tailers - to promote retail competition.
Others, however, such as Meridian and MEUG, are unclear what the EC is trying to fix while Transpower, which has clearly seen it all before, says the EC is simply shuffling deckchairs on the Titanic. The national grid operator’s submission suggests LRA’s would do no more than “produce a different pattern of value transfers and create a new set of disadvantaged participants which would probably lead to a further round of dissatisfaction and objections to the rental allocation.” Watch this space.
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